BHA Group Holdings, Inc. Announces First-Quarter 2002 Operating Results.Business Editors KANSAS CITY Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , Mo.--(BUSINESS WIRE)--Jan. 22, 2002 For the quarter ended December 31, 2001 ("fiscal 2002"), BHA BHA butylated hydroxyanisole, an antioxidant used in foods, cosmetics, and pharmaceuticals that contain fats or oils. BHA n. A white, waxy phenolic antioxidant used to preserve fats and oils, especially in foods. Group Holdings, Inc.'s (Nasdaq: BHAG BHAG Big Hairy Audacious Goal BHAG Bad Honnef Aktiengesellschaft (Bad Honnef, Germany) ) consolidated income was $1.7 million or $.26 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share exclusive of a $1.2 million one-time non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a change in accounting principle. This compares to net earnings of $1.9 million or $.29 per diluted share during the same period in the prior year. The one-time charge relates to the Company's early adoption of a new accounting standard pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to the treatment of goodwill and other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . Including the impact of this one-time charge, net income for the most recent quarter was $0.5 million or $.07 per diluted share. Earnings per diluted share for the quarter of $.26, exclusive of the previously discussed one-time charge, was in line with the guidance of $.24 to $.29 per diluted share provided in an earlier announcement. Earnings before taxes and the non-cash charge for the three months ended December 31, 2001 and 2000, were $2.6 million and $2.9 million, respectively. Exclusive of the impact of foreign currency gains and losses, pre-tax earnings were essentially unchanged as a decline in sales was offset in large part by lower operating costs operating costs npl → gastos mpl operacionales and interest expense. Commenting on the results, James E. Lund, President and Chief Executive Officer, said: "Although business conditions remain a challenge in many of the markets we serve, the first-quarter results are indicative that many of our strategies are working. We are managing our costs while continuing to invest in those areas that will provide us with the greatest advantage in the longer-term. In the near term, we see continued strength in the electrostatic precipitator Noun 1. electrostatic precipitator - removes dust particles from gases by electrostatic precipitation Cottrell precipitator, precipitator electrical device - a device that produces or is powered by electricity (ESP (1) (Enhanced Service Provider) An organization that adds value to basic telephone service by offering such features as call-forwarding, call-detailing and protocol conversion. ) replacement parts and service market on the air pollution control side of our business. We also see opportunity in the sale of ePTFE membranes membranes Obstetrics A popular term for the amniotic sac, see there to customers outside of air pollution control. We plan to maximize our opportunities in these areas while expanding market share in our core fabric filter replacement parts business as conditions in that market remain soft." The following table summarizes BHA's revenues and pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. by segment (dollars in millions):
Quarter Ended
December 31,
2001 2000
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Revenues
Domestic Air Pollution Control (APC) Segment
U.S. Fabric Filter 18.9 22.2
U.S. Electrostatic Precipitator (ESP) 8.9 9.7
U.S. Exports to Latin America and Asia 4.6 5.1
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Total Domestic APC Segment 32.4 37.0
Europe APC Segment 5.3 4.9
BHA Technologies Segment 3.2 2.5
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Total Revenues 40.9 44.4
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Pretax Earnings
Domestic APC Segment 2.5 2.9
Europe APC Segment (0.1) 0.2
BHA Technologies Segment 0.2 (0.2)
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Total Pretax Earnings 2.6 2.9
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Revenues Consolidated revenues for the quarter declined $3.5 million or 8% as compared to the same period in the prior year. Revenues for the Domestic Air Pollution Control (APC (1) (American Power Conversion Corporation, West Kingston, RI, www.apcc.com) The leading manufacturer of UPS systems and surge suppressors, founded in 1981 by Rodger Dowdell, Neil Rasmussen and Emanual Landsman, three electronic power engineers who had worked at MIT. ) Segment decreased 12% as compared to the prior year. The decline primarily relates to the continued weakness in the U.S. manufacturing sector and the impact it has had on BHA's fabric filter replacement parts and service business. Although down from the same period in the prior year, sales of ESP replacement parts and services to customers in the U.S. rose sharply compared to the September 2001 quarter. New order activity in this area during the most recent quarter has been positive, enabling the Company to build a strong backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of open orders as of December 31, 2001. The decline in Domestic APC shipments was partially offset by increased sales of APC parts and services in Europe and higher sales of ePTFE membrane products to non-APC customers through the BHA Technologies Segment. Revenues for the Europe APC Segment increased 8% over the prior year due to a combination of replacement parts business combined with the successful execution of ESP project work. BHA Technologies sales to third parties increased by 30% due in large part to continued success in selling membrane products for use in apparel applications. Pre-Tax Earnings Earnings before taxes and the non-cash charge for the first quarter declined $0.3 million or 12% as compared to the prior year. This decline was due in large part to the impact of foreign currency exchange gains and losses. In the current quarter, the Company experienced a net foreign currency exchange loss of $0.1 million as compared to net gains of $0.3 million recognized in the first quarter of the prior year. Exclusive of the impact of foreign currency exchange losses, pre-tax earnings in the current year were essentially unchanged from the previous year. The Company was able to achieve this despite lower sales due to the combination of improved gross margins and lower operating and interest expense. Gross margin as a percentage of sales improved slightly to 30.3% from 29.9% due to an improved mix of business and lower manufacturing overheads. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. declined due to cost reduction initiatives implemented by the Company in the prior year. Interest expense declined due to the combination of a reduction in bank borrowings and lower interest rates on the Company's variable rate debt. Accounting for Goodwill and Other Intangibles During the most recent quarter, the Company adopted Statement of Financial Accounting Standard (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 142, "Accounting for Goodwill and Other Intangibles." In adopting this standard during the most recent quarter, the Company has elected to implement this standard prior to the Company's required date under the accounting rules. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with SFAS No. 142, the Company has evaluated the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of all recorded goodwill and intangible assets on a segment basis to determine if any of the assets are impaired under the accounting rules. Goodwill and intangible assets with a carrying value of $6.6 million, all of which relates to the Domestic APC segment, have been evaluated and are deemed to not be impaired under the accounting rules. In accordance with the rules, amortization expense for fiscal 2002 and subsequent years relating to certain of these assets that historically had been $0.6 million ($.06 per diluted share) on an annual basis will no longer be recorded. As previously disclosed, the Company has determined that the goodwill attributable to its Europe APC segment is impaired. As such, the Company recognized a $1.2 million non-cash charge as a cumulative change in accounting principle to write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. the goodwill related to such European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations during the most recent quarter. The Company had previously disclosed that the impact of this charge on the fiscal 2002 results would be $.12 per diluted share as it was anticipated that the charge would produce a tax benefit. Due to the structure of the transactions that generated the impaired goodwill, the Company will not recognize a tax benefit as a result of this write-off. As such, the impact of the $1.2 million non-cash charge on the fiscal 2002 results is $.19 per diluted share. On a pro-forma basis, assuming that SFAS 142 was adopted as of September 30, 2000, earnings per diluted share were $.26 for the December 31, 2001, quarter as compared to $.30 per diluted share for the same period in the prior year. Cash Flows During the first quarter of fiscal 2002, the Company generated $2.8 million of cash from operating activities as compared to $0.5 million used in operations in the prior year. The Company used the cash generated from operations to acquire certain fabric filter production assets from a company in Mexico for $0.6 million, invest $1.5 million in production equipment and information technology and to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. $0.8 million of its common stock. Backlog BHA's backlog was $50.9 million at December 31, 2001. This compares with order backlogs of $46.4 million at September 30, 2001, and $58.1 million at December 31, 2000. Outlook Although cautious about the near-term, the Company remains optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. prospects and ability to achieve its earnings growth and other financial targets. For the second quarter of fiscal 2002, the Company anticipates that consolidated sales will be lower than the same period in the prior year by as much as 5% to 10%. Earnings per diluted share for the upcoming quarter are expected to be in the range of $.29 to $.34 per diluted share as compared to $.34 reported for the same period in the prior year. Visibility with respect to future results beyond 90 days remains a challenge. Other Actions BHA announced that the Board of Directors has approved a change in the Company's approach to the payment of cash dividends. Effective immediately, dividends will be paid annually rather than quarterly. BHA anticipates paying an annual dividend for calendar 2002 in the range of $0.12 per share in January 2003. This change is intended to streamline the dividend payment process and lower administrative expense. The Company also reports that it has accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. 2.5 million shares of the 3.5 million shares of BHA common stock authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: by its Board of Directors for repurchase. BHA Group Holdings, Inc. is a world leader in innovative filtration filtration: see sewerage; water supply. Filtration The separation of solid particles from a fluidsolids suspension of which they are a part by passage of most of the fluid through a septum or membrane that retains most of the solids technology. Its two principal operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. are BHA Group, Inc., the world's largest supplier of replacement parts and services for industrial air pollution control systems, and BHA Technologies, Inc., which manufactures and markets expanded polytetrafluoroethylene expanded polytetrafluoroethylene (ePTFE) (ekspan´did pol´ētet´r  -fl (ePTFE) membrane products for use in a variety
of industrial and consumer products.This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that reflect the Company's current views with respect to future events and financial performance. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. The words "should," "believe," "anticipate," "expect," and other expressions that indicate future events and trends identify forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending on a variety of factors, including, but not limited to, the performance of newly established domestic and international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , demand and price for the Company's products and services, and other factors. You should also consult the sections entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Factors Affecting Earnings and Stock Price" and "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial " included in the Company's report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. which was filed with the Securities & Exchange Commission on November 6, 2001.
BHA GROUP HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
& BALANCE SHEETS
(In millions except per-share amounts)
Quarter Ended
December 31,
2001 2000
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Net sales $ 40.9 $ 44.4
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Gross margin 12.4 13.2
Operating expense 9.6 9.8
Interest expense, net .2 .5
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Earnings before income taxes 2.6 2.9
Income tax expense .9 1.0
Cumulative effect of accounting change (1.2) --
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Net income $ .5 $ 1.9
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Diluted shares outstanding 6.4 6.7
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Diluted earnings per share $ 0.07 $ 0.29
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Diluted earnings per share excluding
effect of accounting change $ 0.26 $ 0.29
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Depreciation and amortization $ 1.3 $ 1.6
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The earnings per share figures in this press release are computed
on a "diluted" basis as defined under Statement of Financial
Accounting Standards No. 128, "Earnings per Share."
Dec. 31, Sept. 30,
2001 2001
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Cash and equivalents $ 8.7 $ 9.5
Inventories 22.1 22.8
Accounts receivable 29.0 29.8
Other current assets 5.8 5.2
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Total current assets 65.6 67.3
PP&E and other assets 42.8 43.9
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Total assets $ 108.4 $ 111.2
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Current debt and lease payments $ 2.3 $ 2.5
Accounts payable and accruals 18.3 19.6
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Total current liabilities 20.6 22.1
Long-term debt and capital leases 23.3 24.4
Other liabilities 3.4 3.6
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Total liabilities 47.3 50.1
Equity 61.1 61.1
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Total liabilities and equity $ 108.4 $ 111.2
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